Uber Technologies, Inc. (UBER) develops and operates proprietary technology applications in the United States, Canada, Latin America, Europe, the Middle East, Africa, and the Asia Pacific. Its three segments are Mobility; Delivery; and Freight. The company’s volume and average volume are 15,961,792 and 35,175,805, respectively.
On the other hand, Lyft, Inc. (LYFT) operates a peer-to-peer marketplace for on-demand ridesharing in the United States and Canada. It provides Ridesharing Marketplace, Express Drive; Lyft Rentals; and a network of shared bikes and scooters in various cities. LYFT’s volume and average volume are 12,376,482 and 14,001,490, respectively.
The companies restarted their shared ride services after a long halt since the pandemic. On June 21, 2022, UBER announced the resumption of its shared rides services in a few U.S. cities, while LYFT declared its expansion plans in May. Pent-up demand set their revenues and bookings soaring.
However, their bottom line remains pretty weak. Moreover, amid rising EV demand and surging gas prices, more drivers are opting for Tesla, Inc. (TSLA) than UBER or LYFT. According to Gridwise, 186% more drivers opted for TSLA than last year.
This hinders their margins as they have yet to switch into EV players wholly.
UBER has lost 55.4% over the past year, while LYFT has lost 78.3%. Moreover, UBER has lost 9.1% over the past month and 48.6% year-to-date, while LYFT has lost 20% over the past month and 70.5% year-to-date.
Which stock is a buy? Let’s find out.
Latest Developments
On June 7, 2022, UBER Freight and Waymo Via announced a long-term strategic partnership to develop American Truck logistics. The collaboration culminates Waymo’s autonomous driving technology with UBER Freight’s network and leading marketplace technology and is expected to be a game changer in logistics, pioneering a hybrid freight network.
In addition, on May 19, 2022, UBER and Grocery Outlet Holding Corp (GO) announced their agreement regarding on-demand and scheduled grocery delivery. This partnership could extend the consumer base for both companies.
On the other hand, on May 5, 2022, LYFT partnered with a tele-behavioral health service, Valera Health, to serve the noble cause of spreading awareness about mental health issues. Digital convenience is expected to help break the stigma and bring out more sufferers at the forefront.
Moreover, on May 3, 2022, Elaine Paul, LYFT’s chief financial officer, said, “We will continue improving service levels to benefit our business in the near-term and put us in the best position to support increasing demand over the long-term.”
Recent Financial Results
UBER’s revenue increased 136.1% year-over-year to $6.85 billion for the first quarter ended March 31, 2022. However, its net loss came in at $5.93 billion, up 5,390.7% year-over-year, while its loss per share increased by 4,966.7% year-over-year to $3.04.
LYFT’s revenue increased 43.8% year-over-year to $875.58 million for the first quarter ended March 31, 2022. Its net loss decreased 53.9% year-over-year to $196.93 million, while its loss per share decreased 56.5% year-over-year to $0.57.
Past and Expected Financial Performance
UBER’s revenue increased at a CAGR of 35.3% over the past five years. Analysts expect UBER’s revenue to increase by 71.6% in the current year and 21.2% next year. The company’s EPS is expected to fall by 221% in the current year and increase by 97.5% next year. Moreover, its EPS is expected to grow 22.8% per annum over the next five years.
On the other hand, LYFT’s revenue increased at a CAGR of 56.4% over the past five years. Analysts expect the company’s revenue to increase 31.4% in the current year and 24.6% next year. The company’s EPS is expected to increase by 224% in the current year and 251.6% next year. However, its EPS is estimated to decline 66.8% per annum for the next five years.
Profitability
UBER’s 36.02% gross profit margin is lower than LYFT’s 40.49%. Also, UBER’s negative net income margin of 29.52% compares with LYFT’s negative 22.42%.
However, UBER’s negative ROE, ROA, and ROTC of 53.30%, 5.17%, and 7.74% compare with LYFT’s negative 60.69%, 11.34%, and 22.45%, respectively.
Valuation
In terms of forward EV/S, UBER is currently trading at 1.50x, higher than LYFT’s 0.77x. In addition, UBER’s forward EV/EBITDA of 33.19x is 140.5% higher than LYFT’s 13.80x.
Thus, LYFT is a relatively affordable stock here.
POWR Ratings
LYFT has an overall rating of C, equating to Neutral in our proprietary POWR Ratings system. On the other hand, UBER has an overall rating of D, which translates to Sell. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
UBER has a C grade for Growth, given its weak performance in the latest reported quarter. On the other hand, LYFT has a B grade for Growth, consistent with its improving financials in the last reported quarter.
In addition, both the stocks have a D grade for Stability. UBER’s 24-month beta is 1.58, while LYFT’s 24-month beta is 1.54.
Of the 81 stocks in the Technology - Services industry, UBER is ranked #66. On the other hand, LYFT is ranked #42.
Beyond what we’ve stated above, we have also rated the stocks for Value, Momentum, Sentiment, and Quality. Click here to view UBER ratings. Get all LYFT ratings here.
The Winner
Despite possessing mammoth trading volumes, neither UBER nor LYFT seem ideal investments. While UBER’s stretched valuations and weak financials make it best avoided now, it could be wise to wait for a better entry point in LYFT.
Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Technology – Services industry here.
UBER shares were trading at $21.45 per share on Wednesday afternoon, down $0.12 (-0.56%). Year-to-date, UBER has declined -48.84%, versus a -19.20% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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